July 5 (Bloomberg) -- Echo Entertainment Group Ltd., operator of Sydney’s only casino, fell to a record after the New South Wales government backed Crown Ltd.’s plan to open a rival site nearby, on the shore of the city’s harbor.
Echo fell 5.2 percent to A$2.76, the lowest close since the Brisbane, Australia-based company was spun off from Tabcorp Holdings Ltd. in 2011. Trading volume was almost four times the three-month average. Crown rose 3.2 percent to a two-week high.
Adding a second casino in Sydney would undermine the long-term viability of Echo’s existing Star complex, Chief Executive Officer John Redmond said in an April 8 interview. New South Wales state premier Barry O’Farrell selected Crown’s proposal yesterday to advance to the final stage of a government project approval process, rejecting Echo’s rival plan, which would have extended a license lapsing in 2019 that gives the company exclusive rights to run a casino in the city.
The decision “increases the prospect of increased competition in the New South Wales casino market,” Adam Alexander, an analyst at Goldman Sachs Group Inc., wrote in a note to clients yesterday. Sydney will be the first Australian city to have more than one casino once Crown’s facility is built.
Crown’s development will cause Echo to lose about 20 percent of revenue from high-rolling VIP gamblers and about 15 percent from other table games, Alexander wrote. Trading halts imposed on the companies’ stock ahead of the announcement yesterday were lifted this morning.
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